KANSAS CITY, Mo. — In the rush to file tax returns, Americans leave millions of dollars in deductions on the table. H&R Block’s Tax Institute director said common mistakes are easy to avoid and will save you money.
Maximizing deductions
Director Andy Phillips sat down with Scripps station KSHB in Kansas City to highlight mistakes you can avoid when you file your tax return:
- Many Americans file under the incorrect status. Instead of “single,” many Americans can file as “head of household.” That allows you to deduct more of your income and pay less in taxes.
- Apply for the Earned Income Credit. Phillips said one in five eligible people for the credit don’t claim it. The qualifications for the credit change nearly every year, but Phillips recommends you check into your eligibility every time you file.
- Consider itemizing your deductions. Only about one in three Americans do this. Phillips said in many cases, doing so can benefit you.
2017 may be remembered as the year of the “gig economy” where Americans picked up a second, freelance-style job on the side, whether it was driving for Uber, or renting a room using Airbnb.
Phillips said someone who drove for Uber can deduct mileage, tolls, and snacks they offer to clients. Likewise, someone who rents via Airbnb can claim to be a landlord and take advantage of the depreciation deduction. But you’ll need to save receipts, and keep a detailed log of your business.
Phillips cautioned its best to know how taxes impact your side gig before you begin, so you can plan accordingly all year, making it easier when it’s time to file your return.
“Get smart before you dive into that business and understand what's available and what you should track along the way, so it's not a surprise when you file that tax return with that new side hustle on there,” Phillips pointed out.
DIY or hire a professional?
Now that you know what to look for in your tax return, how do you decide whether to do your taxes yourself, or hire a professional? Phillips said it boils down to how complex your life is. His motto is “life changes mean tax changes.”
If you got married, divorced, bought a home, sold a home, your taxes will change; most likely becoming more complex. In those cases, Phillips recommends hiring someone to help you with taxes.
On the flipside, if you worked one job all year, lived in the same house the entire time, and didn’t have any children, your tax return should be simple to handle by yourself.
Phillips suggested no matter which way you file, prepare all your forms prior to beginning. That way you can complete your return in one sitting. He added it’s never too late to throw in the towel and ask for help if you feel overwhelmed after starting the process by yourself.
Avoiding scams
Every year, it seems crooks come up with an innovative approach to trick you into handing over your tax refund. Phillips said no matter what the newest scam is, there is one effortless way to know if someone is after your money. He said the Internal Revenue Service will send you a letter in the mail, probably multiple letters in the mail, before it ever calls you.
“They're not going to call you out of the blue demanding money, asking for debit or credit card info,” Phillips said.
If you haven’t received a letter from the IRS, but receive a call or email, it’s probably a scam. Phillips said you can always call the IRS or a tax professional if you have a uneasy feeling about a situation.
The deadline to file your tax return or request an extension is April 17, 2018.
